Sprint to Buy Clearwire

This values Clearwire at around US$4.2 billion and represents a 5 percent premium on its closing stock price yesterday. Sprint said in a regulatory filing that its offer also needs the green light from Softbank, the Japanese operator that is currently in the process of acquiring 70 percent of Sprint – and is contingent on that deal going through.

Clearwire is currently in discussions with Sprint regarding a potential strategic transaction. A Special Committee of the Clearwire Board of Directors, previously formed to review potential indications or proposals, including from Sprint, has been reviewing the potential strategic transaction.

Shares of Bellevue, Washington-based Clearwire jumped to 12 percent to $3.07 at 10:18 a.m. in New York trading, rising above the offer price, reports Bloomberg. That suggests investors expect the bidding to go higher.

Clearwire, which peaked at $33.30 in July 2007, had slumped to as low as 90 cents earlier this year. The company is projected by analysts to post a record $1 billion net loss for 2012, according to data compiled by Bloomberg.

Clearwire serves 10.5 million subscribers, but it only bills 1.4 million of them directly. Almost all of the rest are using Sprint devices.

Clearwire and Softbank will likely need 40-60 MHz for macro and small cell build out at 2.6 GHz — that leaves some 40-60 MHz that could be put on the market.

Yet to be determined is what will happen to Dish. Sprint and AT&T are rumored to be the most likely suitors. Dish has said they would prefer not to sell the spectrum, but would rather partner with a carrier — a carrier that does voice.

If Softband/Sprint also do a Dish deal, they will need to sell at least 40 MHz of Clearwire spectrum to avoid a fight with the Federal Trade Commission. By owning the entire 2.6 band, Sprint would have flexibility to carve up parts of Clear’s spectrum for re-sale. Clearwire has the 2.6GHz that AT&T may need for 2.6 GHz-enabled international LTE iPhones.

Some analysts say the Dish spectrum could be worth as much as $12 billion. That’s nonsense. The Dish 2.1 GHz spectrum isn’t internationally harmonized and the lowest 5 MHz of its uplink spectrum (2000-2005 MHz) will be used as a guard band. Still, if Dish spectrum is worth just half what Verizon paid for its AWS frequencies it could be worth at least $4.3 billion (call it $4-$6 Billion).

Remember, Dish has a single, nation-wide license — not piecemeal regional spectrum licenses. Plus, it has a satellite component. It’s everything FirstNet should have been — and probably will be — in 5 years.

Perhaps Google could pay Dish $2-4 Billion for a long-term spectrum lease, to be hosted on Sprint. Then Sprint could sell 40 MHz of 2.6 GHz to AT&T. Sprint also needs to save a Billion for the H Block auction.

So Sprint could spend $2.5B for Clearwire, get back $3-4B from 2.6GHz spectrum sales, then host Mobile Virtual operators like Dish/Google Wireless for operational fees. The G/H Block would be their FD-LTE bread and butter. Small cells at 2.6 and Google Wireless at 2.1 GHz. If Slim wants in, there’s lots of space.

Sprint gets better propagation and range at 2.1 GHz, and Dish could contribute streaming video. Selling excess 2.6GHz to AT&T would keep the FTC off its back. There’s probably some number where everyone is likely to profit. But it’s a big number with lots of risk and moving parts. It could be a house of cards.